Information, Incentives, and the Hospitality Business

My lovely wife and I spent a long weekend in Paso Robles recently. While there we experienced information, incentives, and the hospitality business. This is a cautionary tale for both travelers and businesses.

We had reservations at one of our favorite restaurants. But after checking into our hotel we didn’t feel like driving. The hotel restaurant’s menu looked promising so I asked the nice lady staffing the checking desk of we would need reservations. She replied there would be no problem.

Lesson 1 for travelers: don’t rely on secondary sources. I should have called the restaurant to confirm this information. I didn’t.

Lesson 1 for business: don’t give out information that you don’t have. Most Sunday nights are undoubtedly slow. However, this particular Sunday was just before the Tuesday Veteran’s Day holiday. Many, many people took extra-long weekends because of this.

Having acquired incorrect information, I returned to our room and we discussed the situation. I then picked up the phone and canceled our restaurant reservation.

Lesson 2 for travelers: a bird in the hand … etc. Don’t cancel a reservation until you’re sure you have an alternative.

We hung out in the room for a while then proceeded downstairs around 5:40. The restaurant was closed. But it was supposed to open at 5:30. The door was unlocked so we walked in. The maître de greeted us and gave us two bits of news. First, the restaurant’s computer system had crashed. They were unable to do anything until the system was rebooted. Second, that wouldn’t matter to us because the restaurant was fully booked.

Lesson 2 for businesses: if your restaurant really can’t operate without a computer system, that system is mission-critical. You need a backup system even if it’s just paper and pencils. If you want to go all-in, pay for a duplicate computer system with real-time mirroring. But for heaven’s sake don’t tell your customers to go away!

Lesson 3 for travelers: see Lesson 2 above.

We frantically called our original restaurant and begged them to restore our reservation. They said they could handle it. On arrival we were told the only available tables were in the bar. We accepted, then watched a table in the dining room remain vacant for the duration of our dinner.

Lesson 4 for travelers: see Lessons 1, 2, and 3.

Lesson 3 for businesses: if you’re going to punish people for canceling reservations, you have given your customers an incentive to not bother canceling. Simply not showing up for a reservation is always an option at most restaurants. Would you rather know you have an empty table or wait for a no-show?

Information is important. Try to make sure you get correct information. Businesses need to make sure their employees are giving correct information.

Incentives are also important. If a business gives customers an incentive to distort information at no cost to the customers, then their customers will behave accordingly.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.